Access Bank Plc experienced a quickening force in operations in the third quarter – that produced 40 per cent of its closing profit at the end of September 2020. More than N41 billion of the bank’s closing profit of N102 billion for the nine months of the financial year was generated in the third quarter. With that, the bank has already exceeded its 2019 full-year profit of N97.5 billion.
An upturn that changed the fortunes of the bank came from a sudden change from a huge foreign exchange loss to a massive gain within the three-month period. A net foreign exchange gain of almost N79 billion flowed in as a windfall in the third quarter, which erased a net foreign exchange loss of over N66 billion at half year and left N12.6 billion net gain at the end of the third quarter.
On a quarter-on-quarter basis, net foreign exchange gain multiplied more than three times – representing the most significant event in the bank’s earnings story in the third quarter. The real impact reflects a big turnaround from a 250 per cent rise in net foreign exchange loss at half-year to a 145 per cent growth in net foreign exchange gain at the end of the third quarter.
The second major event on the earnings story of the bank within the third quarter is contrary. Net loss on financial instruments multiplied nearly 62 times to N50.6 billion quarter-on-quarter. High volatility in the bank’s earnings reflects the general instability in the economy and the operating climate.
The loss on financial instruments slashed the outstanding net gains of roughly N135 billion at half year to N84 billion at the end of the third quarter. The closing figure still represents another major windfall for the bank this year compared to the corresponding figure of N3.3 billion in the same period last year.
Another bad patch during the third quarter is a drop of 64 per cent in other operating income quarter-on-quarter to N3 billion. This was partly compensated by a drop of 11 per cent in personnel costs over the same period.
In all, the big gain in foreign exchange enabled the bank’s management to absorb the cost increases and still lift after-tax profit by 55 per cent quarter-on-quarter to N41.3 billion at the end of September.
The elevated performance in the third quarter gave Access Bank a strong forward push on the year-on-year position at the end of the third quarter. From a slight profit decline at half-year, the bank grew after-tax profit by 15.7 per cent year-on-year to over N102 billion at the end of the third quarter.
Though revenue growth slowed down from 22.3 per cent at half year to 15.4 per cent at the end of the third quarter, profit margin improved over the period from 15.4 per cent to 17.3 per cent. Gross earnings amounted to N593 billion, a slowdown for the second quarter, as interest income dropped by 7 per cent year-on-year to N375 billion.
Non-interest income doubled year-on-year to N217 billion at the end of the third quarter and accounted for the improvement in gross earnings over the review period. Except for other operating income that declined slightly, all the other non-interest earning lines grew considerably year-on-year at the end of September 2020.
Interest expenses dropped slightly ahead of interest income at 8 per cent year-on-year to N179 billion – which is a favourable development compared to the half-year position when the cost of funds grew while interest earnings dropped. That lowered the rate of decline in net interest income from 19 per cent at half year to 6.6 per cent to N196 billion at the end of the third quarter.
The pressure from rising net loan impairment charges intensified in the third quarter when the figure rose more than three times to the region of N18 billion quarter-on-quarter. That swelled the year-to-date net loan loss expenses from N10.6 billion in the same period last year to over N34 billion at the end of September 2020.
Rapidly growing credit losses is in spite of a sustaining cautious mood on customer lending in the current year after the merger-induced jump of 46 per cent in customer loan portfolio last year. At the end of the third quarter, customer loans and advances increase by 6 per cent to over N3 trillion. This is one of the largest customer credit portfolios in the Nigerian banking space.
With the slowdown in asset expansion, Access Bank stepped down to the second position on industry ranking by the size of the balance sheet at the end of the third quarter after its one-year reign in 2019. Its margin of leadership narrowed down to a vanishing point at half-year, as a competitive rival closed in and finally beat the bank’s closing asset base of N7.92 trillion at the end of the third quarter.
High growth in operating cost, which has been on since the first quarter, continued in the third. At N247 billion, total operating expenses grew by close to 26 per cent year-on-year to claim 42 per cent of gross earnings against 38 per cent in the same period last year.
The summary of the bank’s earnings story at the end of the third-quarter report is that earnings grew ahead of costs, which improved profit margin and powered the leap in the bottom line. The bank posted an after-tax profit of N102 billion at the end of the third quarter, which is an increase of 15.7 per cent year-on-year.
Earnings per share closed at N2.90 for the nine months to September 2020, improving from N2.71 per share in the same period last year. The bank paid an interim cash dividend of 25 kobo per share at the end of half-year operations.
The full-year outlook indicates that both net loan impairment expenses and operating cost would hamper profit performance in the final quarter. Loan impairment expenses will be the critical factor to watch – which has the potential of undermining the contribution of the final quarter to profit.
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